Local Enemy Bestiary
Once in the dark, rainy town, go west and into the Pub. Go north and upstairs, then go to the fork. There, go east and outside. Head upstairs and use the eastern door to find an Ether . Backtrack out to the ground level and go north to find the Inn. Go inside and you'll notice that there is a clock stopped here. Putting in the right time will allow you to get the powerful Chainsaw tool. There are clues to the puzzle, too, which are obtained by speaking to the always-lying residents... You can also just put in 6:10:50 as the time.
Head to the Relic Shop, then upstairs and outside. Go upstairs and inside the next doorway to find a lot of people walking a designated path. Get in line and go north and outside when possible. There, you'll find a crane. This let's you back to the bottom of the building if you need to go there. Otherwise, go upstairs and skip the opened door.
Continue upstairs and go into the closed door to find a Brigand's Glove . Go back to the open door and head west to jump some buildings. Go through the next door.
There, go along the path to the second westbound path and use it to find. You will soon come across some stairs; examine the pots near their apex to find an Ether and a Hi-Potion .
Then go south and outside. There, go upstairs and jump from the window again. Go upstairs and through the door. There, go upstairs and outside via the next door. Outside, go upstairs and through the next doorway to find the Burning Fist in a chest. Go back outside and continue upstairs. Heal up and speak with the person nearby for a battle.
Dadaluma can use a basic attack, Sweep (damage and inflicts Sap), Jump (invincible, then deals damage), Shockwave , Throw (once or twice), Item (Potion or Hi-Potion), Protect, and Steal.
Steal is only used to counter a Steal. Have Celes use either Attack or party-wide Cures; Sabin uses a Blitz; Edgar uses the Chainsaw tool; Cyan uses his #1/#4 Bushido; and Locke uses Steal or Attack.
After the battle, go upstairs and head into the room. In this room, as you head north, you'll notice branches to the west and the east. Use them to find an X-Potion and some Hermes Sandals in chests.
Go to the north end of the room to find Terra; examine her and watch the scene with Ramuh. Afterwards, be sure to grab all four of the Esper Magicite (Ramuh, Kirin, Siren, and Cait Sith). Go south to meet up with the other party members and to make a new team that must include Locke and Celes; bring along Edgar and Sabin or Cyan.
After Celes and Locke speak with each other, speak with the ghost nearby to get a good tutorial on Magicite and Espers. Equip some Espers, by the way - I'd put Kirin for sure on Locke. Do what you want with the others and return to the overworld.